Template-type: ReDif-Paper 1.0
Author-Name: Bos Jaap 
Author-Name: Molen Maarten van der
Author-workplace-name: METEOR
Title: A Bitter Brew? Futures Speculation and Commodity Prices
Abstract: We introduce a new approach to measuring the possible impact of futures speculation on spotcommodity prices. We advocate the use of a non-parametric, highly flexible empirical model formeasuring this impact, in order to account for possible non-linearity in the transmission fromfutures to spot market. Empirical results for the coffee market show that most of the changes inspot prices can be attributed to shifts in demand and - in particular - supply. Nevertheless,speculation is an important part of the coffee price generation process. The effect of speculationon the price of coffee is indeed spiky, which explains why traditional, mean-variance basedmethods have failed to identify this. However, it is also significant, both statistically andeconomically. An extensive robustness analysis confirms the validity of our results, and - withinthe limitations posed by the data - we have been able to establish causality.
Keywords: financial economics and financial management ; 
Series: Research Memoranda
Creation-Date: 2012
Number: 045
File-URL: http://arnop.unimaas.nl/show.cgi?fid=26323
File-Format: application/pdf
File-Size: 913119
Handle: RePEc:unm:umamet:2012045